A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal examines the case for alternatives to central banking and the reforms needed to move toward free-market money.

The more widespread use of body cameras will make it easier for the American public to better understand how police officers do their jobs and under what circumstances they feel that it is necessary to resort to deadly force.

Americans are finally enjoying an improving economy after years of recession and slow growth. The unemployment rate is dropping, the economy is expanding, and public confidence is rising. Surely our economic crisis is behind us. Or is it? In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Cato scholar Michael D. Tanner examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects.

The Cato Institute has released its 2014 Annual Report, which documents a dynamic year of growth and productivity. “Libertarianism is not just a framework for utopia,” Cato’s David Boaz writes in his book, The Libertarian Mind. “It is the indispensable framework for the future.” And as the new report demonstrates, the Cato Institute, thanks largely to the generosity of our Sponsors, is leading the charge to apply this framework across the policy spectrum.

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Archives: 06/2006

Stuart Butler responds here to my critique of his paper/proposal to break the “health care reform stalemate.” As one might expect, the Heritage guy and the Cato guy agree that federalism is good because “state experimentation permits a comparison of approaches to solving social problems.” Those social problems include low-quality, unaffordable health care and other consequences of excessive government.

My skepticism of Stuart’s proposal stems from the fact that he would have the federal government (1) offer financial incentives that induce states to conduct policy experiments and (2) judge the success of those experiments. That actually runs counter to the idea of federalism and sets up a process where advocates of markets are bound to lose.

State officials know that if they don’t maintain or improve quality of life, people and jobs leave. Thus the freedom to choose one’s state of residence both encourages policy experiments and holds states accountable for them. That decentralized accountability mechanism pretty much cannot be fouled up unless a state prohibits its residents to leave or (more likely) finds some way to shift the costs of its experiments to other states.

Having the feds offer states cash to induce policy experiments would favor collectivist over government-limiting experiments. First, it would shift the tax burden of collectivist experiments to other states and therefore make such proposals more attractive to state legislators. (That is the #1 problem with Medicaid.) Proposals to limit government would be on the losing end of that concentrated benefits/diffuse costs problem. By definition, rolling back government involves taking something away from an organized interest group. Were any state to deliver such a proposal to Stuart’s commission, it would have to arrive tied to other proposals that buy off those interest groups. Thus states would present Stuart’s commission with proposals that either increase government intervention or (at best) have no impact on government intervention. On net, that means more government intervention.

Stuart has more confidence than I do that states would propose market-based reforms. As evidence, he cites recent experiments with defined contributions and health savings accounts in Medicaid. But here I think Stuart makes my point for me. As I explain elsewhere, those are not government-limiting reforms. Vouchers and HSAs make Medicaid more like cash assistance, and therefore just trade some of Medicaid’s current problems for problems associated with cash assistance (read: welfare checks). As long as Congress keeps giving states a dollar-for-dollar incentive to expand their Medicaid programs (what I call “pay for dependence”), vouchers and HSAs likely will increase Medicaid spending.

But suppose a state proposed a fantastic health care reform: eliminating the tax exclusion for employer-provided health insurance and lowering marginal tax rates. That and other tax-based reforms would probably fail because even some people who are generally supportive of the concept (like me) would oppose giving the feds the ability to write different tax rules for different states.

It is true that Congress could reject the inevitably collectivism-heavy package of proposals that the commission would submit. I personally have no confidence that any Congress would do something so sensible, much less that this Republican Congress would. But even if we could rely on Congress to act sensibly, why tempt them?

Finally, having the feds judge the results would create a centralized accountability mechanism susceptible to special interest lobbying, which Stuart acknowledges “would probably help those who want to expand government.” It is in the forum of Stuart’s commission, rather than in society at large, where I fear market-based approaches would not survive.

For the first time in its 90 year history, the Florida Chamber of Commerce has pulled the plug on its backing for a political candidate. State Sen. Alex Villalobos, who received the Chamber’s endorsement in 2005, was dropped today because of his votes on several key issues. Paramount among them: his opposition to school choice.

The only surprise is that it took so long. Business leaders are beginning to understand that our state-run education monopolies are just as harmful—if not more so—than monpolies in any other field.

In recent years, Haughey’s reputation has been badly tarnished by revelations that he diverted millions of dollars from party coffers to finance his lordly lifestyle, that he carried on an affair for years with a newspaper gossip columnist, that he tapped the phones of political journalists, and that he had to sell his large Georgian estate to pay more than $6 million in back taxes.

But Haughey was also “the father of the Celtic economic miracle … that transformed Ireland from one of the poorest countries in Europe to one of its most prosperous and dynamic.” So the column raises an interesting question: Would you rather have an honest, abstemious Puritan who taxes, regulates, and plans an economy into stagnation or worse – or a high-living, philandering cream-skimmer who transforms your economy from the world’s leading exporter of talent into a Celtic tiger?

In his book Prosperity versus Planning: How Government Stifles Economic Growth, David Osterfeld discussed two kinds of corruption. As John Mukum Mbaku explains, Osterfeld “argued that in a heavily regulated economy, one can find two distinct types of corruption: ‘expansive corruption,’ which involves activities that improve the competitiveness and flexibility of the market; and ‘restrictive corruption,’ which limits opportunities for productive and socially beneficial exchange.” In other words, when a trade official takes a bribe to allow imports in, or a regulator issues a business license for a piece of the action, they’re making economic activity happen. But when a regulator embezzles public funds or takes a bribe to prevent a business from opening, he is reducing competition and economic activity. So the problem isn’t corruption per se; it’s corruption that restricts productive activity.

Haughey’s case is slightly different: wiretapping journalists and evading his own taxes are not market-expanding activities. So maybe he offers the political choice in starker relief: was Ireland better off with a corrupt prime minister who kick-started economic growth than it would have been with an honest socialist who kept Ireland in poverty? I’d say so. They should have gotten Helmut Kohl to speak at his funeral. Kohl could have made his own case there: I served 16 years as German chancellor, I ended communism in East Germany and reunified the country, and along the way, to stay in power, I helped my party skim a few million off arms sales and privatization deals. Not as good a case as Haughey would have, since Haughey opened up his country’s economy and improved growth, while Kohl allowed the German economy to slow and stagnate–but I’ll bet a lot of Germans still think it was overall a good bargain.

Last week the Supreme Court said that it would be proper to just assume that unlawful police behavior would be dealt with appropriately by the authorities.

Item: One Frank Jude is bringing a civil suit against the City of Milwaukee because of the actions of its police officers.

Jude accompanied some people to the house-warming party of a police officer. After a while, Jude decided to leave. He was then accused of stealing a police officer’s badge and then all hell broke loose. Jude was swarmed by off-duty cops who beat him to a pulp. When Jude’s friends called 911, the on-duty cops arrived and they proceeded to take Jude into custody for resisting arrest.

The charges against Jude were quickly dropped as it became apparent that he was the victim, not the criminal. Now the investigation had to start over and no one in the government was anxious to handle it.

Prosecutors need the cooperation of the police department to do their job–so they look the other way much more often they should when it comes to allegations of police misconduct (it certainly must vary from one jurisdiction to the next). But the Jude beating would be the exception to that rule. The Jude case is known as a “heater,” which means the handling of the incident is going to be scrutinized by the news media.

The incident wasn’t caught on videotape, but the beating was outdoors and there were civilian eyewitnesses who have accounts that contradict those of the off-duty police officers. And this wasn’t just an unprovoked baton blow to the stomach. The beating was severe. This one can’t be ignored. Thus, the district attorney’s office indicted three officers and the police department fired them. A jury later acquitted the officers of criminal conduct. And Jude is now bringing a civil suit against the city.

Let’s anticipate the fact that Jude will be able to negotiate a substantial settlement from the city for his injuries. Some will say “the system worked.” That is, it was tragic event, but the bad apples were fired from the force and prosecuted. The victim brought a civil lawsuit, as is his right, and received a fair settlement. Case closed.

On closer inspection, I think this case shows some severe problems and that the Supreme Court is just wrong to “assume” these problems away.

Here are a few points to note about this incident:

1. Police Actions at the Crime Scene. The police supervisor who arrived on the scene that evening sent the off-duty officers involved in the incident into the same house instead of separating them, as is the standard procedure.

2. The Actions of the Prosecutor. The district attorney had difficulty explaining his policy of waiting a few days before interviewing persons injured by the police while being arrested. Detectives normally want to interview crime victims as soon as possible while their recollection is fresh.

3. The Actions of the Defendants. Though off-duty, the men who beat Jude say they were “acting as police officers” when they used force against him. On this view, they were investigating a theft and Jude was the suspected culprit. Though Jude was unarmed and outnumbered, these cops went into court and thought they could credibly claim that what they did was legal and proper.

4. The Actions of the Police Witnesses.

A. The off-duty cops who were on the scene, but who were not charged, were key witnesses. Although a half-dozen non-police witnesses saw kicking and beating, none ofthe police witnesses saw that. They were defense witnesses.

B. A few on-duty cops who arrived on the scene testified for the prosecution about what they saw. Because of their cooperation, they told the court of retaliation within the police department. One officer took an early stress-related retirement.

5. Media Exposes Dysfunctional Police Bureaucracy.

A. After the scandal broke, the news media found that one of the cops that was charged had a questionable background. The police department promised to put tougher procedures in place for prospective police recruits.

B. Because one of the officers charged was involved in another controversy, the media asked what procedures were in place to track potentially abusive cops. The police chief responded by saying that she really wanted to have such a system in place.

Some will argue that the exclusionary rule, which was the subject of this week’s Supreme Court ruling, is still a bad idea. After all, the exclusionary rule would not have done a thing for Jude or other victims of police misconduct. One answer is that there is nothing ill-advised about having multiple “checks” upon the police powers of the government. After all, it might be years until another “heater” case comes along in Milwaukee. And what about other jurisdictions around the country? Is it wise to assume that there are only a handful of dysfunctional bureaucracies out there?

I just spoke with Prof. Sam Walker, one of the most respected criminologists in the country, and an expert on police tactics and procedures. Justice Scalia cites Walker in his opinion in Hudson, quoting him directly on page 12:

There have been “wide-ranging reforms in the education, training, and supervision of police officers.” S. Walker, Taiming the System: The Control of Discretion in Criminal Justice 1950-1990, p. 51 (1993).

Scalia preceded the Walker cite with this thesis sentence:

Another development over the past half-century that deters civil rights violations is the increasing professionalism of police forces, including a new emphasis on internal discipline.

Walker adds, “Scalia turned my research completely on its head. My point was that these reforms came about because the courts, specifically the Warren Court, forced the police to institute better procedures with judicial oversight. Scalia now wants to take that oversight away.”

Walker says political leadership, internal procedures, media oversight, and public pressure are all necessary to ensure civil liberties, but that judicial oversight is extremely important as well, and that Scalia misused his scholarship to imply that Walker supports a diminishing role for the courts.

Walker also says his research focused on conventional policing, not drug policing. The latter, he says, “is a special kind of policing,” and says he would agree that the direction of drug policing of late (which of course was what the Hudson case is all about) does raise significant civil liberties concerns. One might also note that Walker’s research for that particular book ended in 1990, sixteen years ago.

Congressional Quarterly reports that the attack on 527 groups has ground to a halt. As you recall, 527s are organizations created by the tax code. They are used to raise and spend money on elections campaigns. 527s have to disclose their contributions, but they are not bound by other aspects of federal campaign finance law, most notably, contribution limits. 527s helped John Kerry a lot in 2004. House Republicans, though having opposed restrictions on campaign finance for years, have been trying to eliminate 527s since the 2004 campaign. Earlier this year, it looked like they might do so.

Now things look better for those of us concerned with free speech. The House remains eager to get rid of 527s (as part of a “lobbying reform” bill), but the Senate will not go along. Why not? Senate Democrats know what’s up, and with the exception of Russ Feingold, might vote against a lobbying bill that eliminates 527s. So that’s 44 votes against the bill. Seven Senate Republicans also told their leader, Sen. Frist:

As Republicans, we strongly believe in freedom, including freedom of expression and association. We campaigned for office on the principles of a limited and constitutional government. As elected officials we took an oath of office to “support this Constitution.” The First Amendment’s dictates are a model of clarity: “Congress shall make no law… abridging the freedom of speech.” Yet the House of Representatives approved a bill (H.R. 513) that proposes new restrictions on speech about politicians and policies to be enforced under the threat of criminal penalties.

The seven Republicans then threatened to support a Democratic filibuster against the lobbying bill. Who knows? Those 7 plus the Democrats might even make up a majority in the Senate?

So partisanship and principle have worked together well to protect freedom of speech. For now.